measurement of market share and market growth

3.1 The Nature of Marketing – Markets

Objective

To understand how marketers analyse markets, measure performance, and use this information to make strategic decisions.

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1. The Role of Marketing and Its Link to Corporate Objectives

• Definition: Marketing is the process of identifying, anticipating and satisfying customer needs profitably.
• Primary marketing objectives – revenue growth, market‑share expansion, brand equity, customer loyalty, profitability.
• Link to corporate goals – marketing objectives are set to support wider business aims such as market leadership, diversification, sustainability or shareholder return.

2. Demand and Supply in a Market

Understanding the forces that move demand and supply helps marketers forecast market size, price levels and competitive intensity.

Factor influencing demand	Effect on demand	Factor influencing supply	Effect on supply
Price of the product	↓ price → ↑ quantity demanded	Cost of production	↓ cost → ↑ quantity supplied
Consumer income	↑ income → ↑ demand for normal goods	Technology	Improved tech → ↑ supply
Tastes & preferences	Positive change → ↑ demand	Number of sellers	More sellers → ↑ supply
Prices of substitutes/complements	↑ substitute price → ↑ demand for own product	Regulation & taxes	Higher tax → ↓ supply

3. Types of Markets

3.1 Consumer (B2C) vs Industrial (B2B) Markets

Aspect	Consumer (B2C)	Industrial (B2B)
Buyer	Individuals / families	Businesses, government, institutions
Purchase motive	Emotional, personal benefit	Rational, profit‑oriented
Purchase size	Small, frequent	Large, infrequent
Decision process	Short, fewer stages	Long, multiple decision‑makers

3.2 Geographic Scope of Markets

• Local market: Sales within a town or city (e.g., a neighbourhood bakery).
• National market: Sales across the whole country (e.g., a UK‑wide clothing retailer).
• International market: Sales in two or more countries (e.g., a smartphone brand sold worldwide).

4. Product‑Orientation vs Market‑Orientation

Orientation	Key focus	Typical behaviour
Product‑oriented	Quality, features, production efficiency	“If we build it, they will come.”
Market‑oriented	Customer needs, wants and preferences	“What does the market want and how can we satisfy it?”

Most successful modern firms adopt a market‑oriented approach because it aligns product development with actual demand, reducing the risk of unsold inventory.

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5. Measuring Market Share

Market share is the proportion of total sales in a market that is earned by a particular company over a specific period.

Formula (value or volume):

$$\text{Market Share (\%)} = \frac{\text{Company sales (value or units)}}{\text{Total market sales (same unit)}} \times 100$$

It can be expressed in monetary terms (e.g., £) or physical units (e.g., units sold). Consistency of units is essential.

5.1 Example – UK Smartphone Market 2023 (Units)

Company	Units Sold (million)
Alpha Phones	12.5
Beta Mobile	9.0
Gamma Tech	6.5
Delta Devices	4.0

Total market sales = 12.5 + 9.0 + 6.5 + 4.0 = 32.0 million units

Market share of Alpha Phones:

$$\text{MS}_{\text{Alpha}} = \frac{12.5}{32.0}\times100 = 39.1\%$$

5.2 Why Market Share Matters

• High share can give pricing power, brand visibility and economies of scale.
• Share alone does not guarantee profitability – margins, cost structure and product mix also matter.
• Changes over time signal competitive moves (e.g., a falling share may indicate loss of relevance or stronger rivals).
• Share is a key input for strategic tools such as the BCG (Boston) Matrix.

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6. Measuring Market Growth

Market growth rate measures the change in the size of a market over a period, expressed as a percentage.

Formula:

$$\text{Market Growth (\%)} = \frac{\text{Current period sales} - \text{Previous period sales}}{\text{Previous period sales}} \times 100$$

6.1 Example – Smartphone Market Growth 2022‑2023

Previous period (2022) sales = 28.0 million units

Current period (2023) sales = 32.0 million units

$$\text{Growth Rate} = \frac{32.0 - 28.0}{28.0}\times100 = 14.3\%$$

6.2 What the Growth Rate Tells Us

• Positive growth (>0 %) – expanding market; opportunities for new entrants, product extensions or price premiums.
• Negative growth (<0 %) – contracting market; firms may need to diversify, cut costs or target niche segments.
• Very high growth (e.g., >20 %) – attracts intense competition and rapid innovation; firms must be agile.

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7. Strategic Implications of Changes in Market Share & Market Growth

• Increasing share in a growing market – reinforces market leadership; firms can consider premium pricing, further investment or product line expansion.
• Increasing share in a stagnant/declining market – defensive tactic; focus on cost control, differentiation and protecting margins.
• Decreasing share in a growing market – warning sign; may require penetration pricing, stronger promotion or product redesign.
• Decreasing share in a declining market – may trigger exit strategies, divestiture, or a shift to niche/high‑margin segments.

Strategic Response Matrix

Situation	Possible Strategic Action
Low share, high growth	Penetration pricing, aggressive promotion, product‑line expansion, partnerships.
High share, low growth	Product differentiation, market development (new geographies), value‑added services, cost‑efficiency programmes.
Falling share, high growth	Re‑positioning, innovation, acquisition of capabilities, increased promotional spend.
Falling share, falling growth	Cost‑leadership, niche focus, strategic withdrawal, or re‑allocation of resources to growth markets.

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8. Mass Marketing vs Niche Marketing

Aspect	Mass Marketing	Niche Marketing
Target	Whole market (e.g., global fast‑food chain with a standard menu)	Specific, well‑defined segment (e.g., eco‑friendly yoga wear for environmentally‑conscious women)
Marketing mix	One‑size‑fits‑all mix; economies of scale	Tailored mix; higher relevance to the segment
Advantages	Lower per‑unit cost, broad brand awareness, easier distribution	Higher customer loyalty, less direct competition, ability to charge premium prices
Disadvantages	Risk of being “generic”, vulnerable to mass‑market competitors, limited differentiation	Smaller total market size, higher per‑unit cost, reliance on a narrow segment

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9. Market Segmentation

Dividing a market into distinct groups of buyers with similar needs or behaviours.

Segmentation basis	Key variables	Typical example	Advantages	Disadvantages
Geographic	Region, climate, urban/rural	Winter coats sold in cold regions	Allows localisation of product & promotion	May fragment the market, increasing cost
Demographic	Age, gender, income, education	Student discounts for 18‑25 low‑income groups	Easy to measure and target	Ignores lifestyle differences within groups
Psychographic	Lifestyle, personality, values	Luxury cars marketed to status‑oriented consumers	Creates strong brand image and loyalty	Harder to research and quantify
Behavioural	Usage rate, loyalty, occasion, benefits sought	Frequent‑flyer programmes for loyal airline customers	Direct link to purchasing behaviour	May change quickly; requires continual data updates

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10. Customer Relationship Marketing (CRM)

• Definition: Strategies and technologies used to manage and analyse customer interactions throughout the lifecycle to improve retention, loyalty and profitability.
• Key benefits
  • Personalised communication and offers.
  • Deeper insight into buying patterns and lifetime value.
  • Higher customer retention and reduced churn.
  • Lower marketing cost per acquisition.
• Potential costs / challenges
  • Investment in software, data storage and staff training.
  • Data‑privacy compliance (e.g., GDPR).
  • Risk of data inaccuracy leading to poor decisions.
  • Need for ongoing maintenance and analysis.
• Typical CRM tools – loyalty cards, email newsletters, mobile apps, data‑driven analytics platforms, AI‑based recommendation engines.

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3.2 Market Research

1. Purposes of Market Research

• Identify market opportunities and threats.
• Understand customer needs, attitudes and purchasing behaviour.
• Test new product concepts, pricing and promotional ideas.
• Monitor competitor activity and market trends.

2. Types of Data

Data type	Source	Typical use
Primary data	Surveys, interviews, focus groups, observations, experiments	Specific, up‑to‑date information for a particular research objective.
Secondary data	Company records, government statistics, trade publications, internet, market reports	Background information, trend analysis, benchmarking.

3. Sampling Techniques

• Random sampling – every member of the population has an equal chance; gives the most statistically reliable results.
• Stratified sampling – population divided into sub‑groups (strata) and sampled proportionally; useful when key segments differ.
• Convenience sampling – easy to reach respondents (e.g., shoppers in a mall); cheaper but less reliable.
• Quota sampling – researcher sets quotas for certain characteristics; balances cost and representativeness.

4. Reliability and Validity

• Reliability – consistency of results when the research is repeated under similar conditions.
• Validity – extent to which the research measures what it intends to measure (e.g., a question about “brand loyalty” actually reflects loyalty).
• Techniques to improve both: pilot testing, clear wording, using established scales, and ensuring a representative sample.

5. Data Analysis Methods

Method	When to use	Key output
Descriptive statistics (mean, median, mode)	Summarising quantitative data (e.g., average spend)	Simple summary tables, bar charts.
Cross‑tabulation	Exploring relationships between two variables (e.g., age vs brand preference)	Contingency tables, chi‑square test.
Regression analysis	Predicting the impact of one variable on another (e.g., price elasticity)	Regression equation, R‑square value.
Qualitative thematic analysis	Interpreting open‑ended responses or focus‑group transcripts	Key themes, verbatim quotes.

6. Limitations of Market Research

• Time‑consuming and can be costly, especially primary research.
• Respondent bias – social desirability, inaccurate recall.
• Rapid market change can make data obsolete quickly.
• Secondary data may be outdated or not specific enough for the research question.

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3.3 The Marketing Mix (4 Ps)

1. Product

• Goods vs Services – Tangible vs intangible; services are perishable, inseparable, variable and require customer participation.
• Unique Selling Proposition (USP) – The distinctive benefit that sets the product apart from competitors.
• Product Life‑Cycle (PLC)
  1. Introduction – low sales, high costs, need for awareness.
  2. Growth – rapid sales increase, economies of scale, rising profits.
  3. Maturity – sales peak, competition intense, need for differentiation.
  4. Decline – sales fall, market contracts, possible harvesting or divestment.
• Boston (BCG) Matrix – Positions product lines by market growth and relative market share:
  • Stars – high growth, high share (invest).
  • Question Marks – high growth, low share (decide to invest or divest).
  • Cash Cows – low growth, high share (harvest).
  • Dogs – low growth, low share (consider divestiture).

2. Price

• Pricing objectives – profit maximisation, market‑share growth, survival, status‑quo, or return on investment.
• Factors influencing price
  • Cost of production and desired profit margin.
  • Customer perceived value.
  • Competitive pricing.
  • Market demand and price elasticity.
  • Legal, ethical and social considerations.
• Common pricing methods

  Method	When used
  Cost‑plus pricing	When costs are stable and a fixed margin is required.
  Competitive (or market) pricing	In highly competitive markets where price is a key differentiator.
  Penetration pricing	To quickly gain market share in a growing market.
  Skimming pricing	For innovative products with low competition and high perceived value.
  Psychological pricing	When price perception influences purchase (e.g., £9.99).

• Price elasticity of demand – Measures how quantity demanded responds to a change in price; crucial for setting optimal price points.

3. Promotion

• Objectives – Inform, persuade, remind, and add value.
• Promotional mix elements

  Element	Key features
  Advertising	Paid, non‑personal communication (TV, online, print).
  Sales Promotion	Short‑term incentives – coupons, contests, rebates.
  Public Relations (PR)	Earned media, press releases, events, sponsorship.
  Direct & Digital Marketing	Email, SMS, social media, search‑engine marketing, influencer collaborations.
  Personal Selling	Face‑to‑face or virtual interaction; important in B2B and high‑value B2C.
  Packaging & Branding	Visual identity, brand personality, legal information; influences perception and shelf impact.

• Integrated Marketing Communications (IMC) – Coordinating all promotional tools to deliver a consistent message.

4. Place (Distribution)

• Distribution objectives – Make the product available to the right customers, at the right time, in the right quantities.
• Channel levels
  • Zero‑level (direct) – Manufacturer to consumer (e.g., online store).
  • One‑level – Retailer or wholesaler.
  • Two‑level – Wholesaler + retailer.
  • Three‑level – Agent + wholesaler + retailer.
• Distribution intensity

  Intensity	Typical use
  Intensive	Convenience goods – aim for maximum coverage.
  Selective	Shopping goods – limited number of outlets for brand control.
  Exclusive	Specialty goods – single or few retailers, high service level.

• Logistics considerations – warehousing, inventory management, transportation, order fulfilment, and reverse logistics.

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11. Summary Checklist for Exams (AS Level)

1. Define market share and market growth; write and explain the formulas, including the choice of value vs volume.
2. Calculate market share and growth from given data; interpret what a high/low share or growth rate indicates for a firm.
3. Explain the difference between consumer (B2C) and industrial (B2B) markets and give examples of each.
4. Distinguish local, national and international markets with appropriate illustrations.
5. Contrast product‑orientation with market‑orientation, stating the advantages of a market‑oriented approach.
6. Identify strategic responses to the four possible combinations of market‑share change and market‑growth rate.
7. List the advantages and disadvantages of mass marketing and niche marketing, providing real‑world examples.
8. State the four bases of market segmentation; give one example for each and discuss the main advantages and disadvantages of segmentation.
9. Define Customer Relationship Marketing (CRM); list at least three benefits, two potential costs/challenges, and two common CRM tools.
10. Explain the purposes of market research; differentiate primary and secondary data with examples.
11. Describe at least three sampling methods and discuss reliability vs validity in research.
12. Identify two quantitative and one qualitative data‑analysis techniques used in market research.
13. Outline the four elements of the marketing mix (4 Ps) and give one key decision point for each (e.g., product line, pricing method, promotional tool, distribution intensity).
14. Summarise the product life‑cycle stages and the Boston Matrix quadrants; explain how they guide strategic decisions.
15. State three pricing objectives and match each with an appropriate pricing method.
16. List the six elements of the promotional mix and give a brief example of when each would be most effective.
17. Explain the three levels of distribution channels and the three types of distribution intensity, with examples.